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Building a Strong Business Model in Bangor Essay

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Updated: Jun 8th, 2022

Introduction

Based on the growing impact of technology on commerce, it has become increasingly imperative to understand the impact that e-commerce development has on existing business models based on the brick-and-mortar framework (Bolton, Chapman and Mills, 2019; Morgan et al., 2020). This curiosity stems from the fact that most companies have not redesigned their business models to reflect contemporary changes in the business environment, which have been brought by the growth of e-commerce and rapid rates of digital penetration (Jasrotia, Mishra and Koul, 2019; Bhandari and Bansal, 2019; Kassirer et al., 2019). On this basis, there is a need to understand how new business models could be developed to accommodate such changes in the macro-environment.

The business model canvas, which integrates aspects of feasibility, desirability and viability in a company’s overall corporate strategy will be used as a reliable framework of assessing business model efficacy. In the model, the concept of desirability will refer to the segmentation of customers into different groups, development of customer relationships, assessment of business communication channels and the creation of a strong value proposition plan (Jabłoński, 2019; Weinstein, 2020; Quero and Ventura, 2019). Comparatively, the feasibility of a business model is analysed by reviewing available resources, key activities and partners in an organization. Lastly, the “viability” aspect of the aforementioned business model canvas is investigated through an assessment of a business’s cost structures and business revenue streams.

This paper explores the application of the business canvas model to three types of organizations based in Bangor. The first firm is called “A Law,” which is an information communications technology (ICT) company that develops accountancy software for small firms. The second firm is Bognant Blogs, which provides customer reviews regarding their purchasing and product experiences. Comparatively, the third and last company that will be analyzed in this document is Caradog Cake – a pastry business that serves cakes and similar products at weddings and birthday events. The business canvas model will be used to evaluate how these three companies operate. Each of the analyses will integrate the nine aspects of the canvas, which are customer relationships, core value proposition, channels, key resources, key activities, key partners, customer segments, the sources and methods of revenue generation, and the costs of revenue generation.

Application to Company A

Customer Relationships: As highlighted above, the business canvas model was used to evaluate the operations of A Law, which is an online company that provides accountancy software. The nine aspects of the business canvas model highlighted above were used to evaluate the company’s main operations. In the context of this review, how companies relate with their customers largely dictates the quality of relationships they share with them. By extension, it means that customer relationships play a significant role in determining a company’s sales revenues because good customer relationships nurture loyal customers who increase a company’s sales (Langan, Cowley, and Nguyen, 2019). Through an acknowledgment of the need to maintain good relationships with its customers, A Law has been providing short-term software solutions to address some of the operational challenges affecting its clients. By doing so, the firm strives to develop long-term plans for improving the overall core value proposition of the business to its customers.

Alternatively, the development of strong customer relationships between A Law and its clients stems from a trend of growing consumer bargaining power in the market. Indeed, there is no time in history when consumers have been more powerful in defining the nature of the relationships they share with companies. Therefore, firms like A Law have to pay attention to their clients’ needs and provide software solutions to address them. This basis of reasoning defines the criteria of engagement between A Law and its customers. In this regard, it is assumed that A Law’s business model is customer-centric.

Core Value Proposition: The value proposition of a business should demonstrate the value of a business to its customers or shareholders. Relative to this assertion, Berends et al. (2016), Sigala (2019), Waller and Iluzada (2020) claim that a succinct core value proposition should be simple to decipher by clearly identifying how the product or service fulfills a certain need and how a company communicates such benefits to its customers. Stemming from this background, A Law has developed a strong market reputation of being trusted software solutions expert for accounting firms. On this basis, the firm maintains strong customer relationships by developing software solutions that enable clients to simplify their organizational tasks.

Alternatively, one of the agreements for both A Law and its customers is that the data generated from the software users will be stored in the cloud or the company’s servers. This strategy gives them the ability to retrieve information from any location. Therefore, access to data is improved through the implementation of this strategy. Additionally, the safety of information is equally enhanced because cloud data is safer than information stored in physical hard drives.

Channels: A company’s channels refer to techniques it uses to bring value or happiness to its customers. Technically, the concept refers to the certainty of physical value delivery challenges which companies use to create value for their clients (Donnelly et al., 2015). Relative to this definition, it is assumed that A Law communicates with external shareholders through digital platforms, such as e-mails and website feedback. Most of the information communicated on these platforms is linked to software use and the creation of the right fit between its internal organizational capabilities and the firm’s main operational needs. Therefore, it is assumed that the company mainly communicates with its customers using digital means.

Key Resources: A business’s resources refer to what it can depend on to complete its operational tasks and fulfill its core objectives. Therefore, the elements it relies on to make these processes successful largely dictate the kind of resources required by the organization to fulfill its mission (Barbour and Luiz, 2019). A Law has been operational for more than five years and has a staff of about 110 employees. This employee group is a key resource for the firm because they have the institutional knowledge and technical skills to implement the organizational plans. It is also assumed that the company has adequate capital injection from its key shareholders to enable it to finance its software developmental processes. Collectively, these resources are indispensable to the company.

Key Activities: A company’s goals largely define the kind of objectives it aims to achieve within set parameters of operation. However, these goals have to be achieved by implementing a set of key activities that should guide operational processes. Part of the exercise may involve undertaking activities that are primarily designed to capitalize on achieving core objectives and neglecting those that do not contribute towards the achievement of the same objectives (Adner, 2017). The reprioritization of objectives because of changes in the business environment is largely responsible for its 15% annual increase in revenue over the past five years of operation.

Key Partners: Every business has a group of firms or organizations that allow it to accomplish its goals. Their key task is to alleviate some responsibility from the parent organization to allow it to focus on core areas that enhance its core competencies. Most of A Law’s software developers are located in its Bangor head office but others are also subcontracted, on a freelance basis, to work remotely. West (2019), Suman, Chyon, and Ahmmed (2020) suggest that true partnership agreements increase the value of a business in ways that could not be realized if it worked alone. Therefore, partnerships should create additional value as a justification for their adoption.

Customer Segments: A company’s segmentation plan refers to how well a firm breaks down its core customer group into smaller entities, based on shared similarities, such as age, and income. A Law engages in software development for small businesses, as a key segment of its customer profile group. The larger market is comprised of corporate clients who seek software solutions to manage their business processes. Already, A Law focuses on firms providing legal service as its core customer segment. Conversely, the strategy approach means that it does not target large enterprises with a lot of resources and options for software development. Similarly, the firm targets clients that operate on a small scale and offer legal services.

Sources and Methods of Revenue Generation: A Law uses a monthly subscription model, whereby the firm charges a monthly subscription fee for access to software usage after a 3-month trial period ends. Support and updates are also included in the monthly subscription, thereby giving more clients more options in payment facilitation and value delivery.

Costs of Revenue Generation: A Law spends up to 17% of its revenue on marketing. Although this percentage is high, relative to industry standards, the company believes that it is justifiable to spend this amount of money on activities that would generate revenue based on the high returns on investment they attract.

Application to Company B

Customer Relationships: As an online content-generating company, Bognant Blogs improves its customer relationships by highlighting issues that are important to them. Therefore, it acts as a platform of engagement for customers to air their views and firms to be aware of them.

Core Value Proposition: The main value proposition offered by Bognant Blogs is the generation of feedback regarding the use of products and services. This data allows the company to get valuable information regarding the perception of customers regarding different products and services as well as the role of businesses in improving their lives.

Channels: Bognant Blogs has grown from a small enterprise with a viewership of a few thousand people to having more than 5 billion views annually. The main assumption underlying its growth is the optimization of digital communication channels, which is assumed the main channel of communication between the company and its clients.

Key Resources: As a virtual company, Bognant Blog’s main resource is the internet and the digital resources associated with it. Through their utilization, the company can source customer views, analyze them and disseminate linked information through an equally digital distribution network that can reach people anywhere on the globe. Therefore, the internet is a key resource for implementing the company’s overall business strategies.

Key Activities: Bognant Blog’s key activities include monitoring consumer feedback to find out authentic views and gather valuable data regarding their product purchasing experiences and overall utility value. In this regard, the company is an online content-producing firm that specializes in generating consumer reviews about different products and services.

Key Partners: Most of Bognant Blog’s key partners are companies that provide consumer goods and services because, through their activities and service processes, the company can gather honest consumer feedback that would improve their value offing. Customers are also important partners because they generate the content needed to make the reviews. Their honest feedback is relied on to form a set of generalized opinions about consumer purchasing experiences. At the same time, their insights are collated to identify noticeable patterns of thinking across multiple purchasing platforms. Additionally, Bognant Blogs includes affiliate links on the website, which make it possible to generate additional revenue from the linked marketing programs. In this type of arrangement, a company pays another firm a set commission for all sales generated from the website (Monferrer, Blesa, and Ripollés, 2015; Labhane, 2019). This is a performance-based compensation plan, which works when the activities of one company are used as a benchmark for assessing the overall performance of another one.

Customer Segments: Consumers and companies are the two main customer segments for Bognant Blogs. The firm acts as a platform for engaging both parties on different issues affecting the overall purchasing experience. Therefore, corporates act as a core customer segment because they can use the feedback generated from the reports to improve their products and services (Manolova et al., 2020; Corbo, Pirolo, and Rodrigues, 2018). Similarly, consumers also form another important customer segment because they can share their views about the purchasing process or highlight areas they would wish are addressed. As a blogging firm, Bognant acts as an intermediary between the two parties, thereby cementing the view that they are its two key customer segments. The main assumption underpinning this statement is that the company’s views are accessible to both parties.

The Sources and Methods of Revenue Generation: The revenue generation model is based on the cost-per-click framework whereby the company’s income is dependent on how many clicks it generates from consumers. In other words, the firm’s revenue generation process is tied to the frequency that customers make in clicking on a specific advertisement. Gai and Klesse (2019) say that companies that want to increase their brand recognition or reach a wide sample of people appropriately use this cost-per-click business model to get the best results. However, its main disadvantage is that it focuses on the number of customers engaged as opposed to the quality of information they provide them (Bojovic, Sabatier, and Coblence, 2020).

The Costs of Revenue Generation: Bognant Blogs monetizes its business model through Google AdSense. This revenue generation framework works by making sure that the website content developed on the platform appeals to a specific consumer group. In other words, all the texts messages, videos, and interactive content developed by the company are designed to meet the needs of a specific profile of people.

Application to Company C

Customer Relationships: Developing good customer relationships is a key component of Caradog Cake’s business plan because the firm caters to the most intimate needs of its customers based on the understanding that the products it offers (cakes and pastries) are consumed in occasions considered sentimental to the customers, such as weddings and birthday parties. Therefore, maintaining a strong relationship with its customers is a core aspect of the firm’s operational plans because of its centrality to the provision of products that align with their needs.

Core Value Proposition: The Company also has a positive impact on the community by employing people who have been previously struggling to find a place to work. Besides assigning delivery work to most of them, the company also trains the staff on how to make cakes, thereby adding to their skill base.

Channels: Starting more than three years ago, Caradog Cake follows an online business model whereby shoppers order goods online and have them delivered to their doorstep. This operational framework relies on digital communication channels, which are seamless and easy to execute. Their timely and efficient nature also makes it possible to process orders faster and easily, thereby improving the customer purchasing experience. Hofer, Niehoff-Hoeckner, and Totzek (2019) affirm the same advantages of using digital channels to conduct business through a broader interrogation of the benefits of using the e-commerce business model as a primary framework of doing business.

Key Resources: As mentioned in this paper, a firm’s key resources refer to the inputs needed to complete its organizational plans. Depending on the type of business a firm is engaged in; its key resources vary. For Caradog’s Cakes, its main resource is the unique ingredients that it gets from seven farms located in Gwynedd. These products play a critical role in differentiating the company’s products from those of its competitors because they allow the bakers to differentiate their cakes from their unique tastes. The company’s positive brand image in the market is also a key resource because it is responsible for the high record of repeat purchases, which have sustained the firm’s sales. Particularly, this positive brand image has been most intensive among families who have bought the company’s products in the past. These social units are responsible for sustaining the company’s revenues because they organize the weddings and birthday parties to which Caradog is invited.

Key Activities: Caradog Cake is a small business that sells cakes and pastries. Therefore, its main activity is baking cakes and selling them to different groups of customers, most of who are holding social events, such as birthday parties and weddings. Part of the company’s key activities involves delivering the final products to the stated venues using drivers and riders who preserve the food and serve them at the final destination.

Key Partners: Being a local business located in Bangor, Caradog Cake enjoys strong community roots with local suppliers of products and services that are essential for the company’s daily operations. Its main suppliers are the aforementioned seven farms, which act as sources of ingredients for its products. The bakery shop also has community members as its main partners. Collectively, these parties share a symbiotic relationship whereby Caradog benefits from economic gains of doing business in the local community as its inhabitants benefit from an increase in employment opportunities.

Customer Segments: The company’s main customers are people who hold special small gatherings, such as weddings and birthday parties. Therefore, the firm caters to a wide variety of customers who may include corporate clients, families, and even individuals. The main criterion of engagement is the presence of a social event or occasion where the guests need cakes and other pastries delivered. Therefore, Caradog’s customers can be broadly classified into two groups: individual and corporate clients.

Sources and Methods of Revenue Generation: Caradog generates its revenue from online sales, whereby customers order goods virtually and have them delivered at their homes, or at their respective locations where they are holding social gatherings.

Costs of Revenue Generation: Part of Caradog’s success is pegged on the affordability of its products. This means that the firm prices its products close to the industry average, thereby denying it the opportunity of making “supernormal” profits. Arrondo, Garcia, and Gonzalez (2018) refer to this pricing framework as a mass-targeted model aimed at generating the most income from an increase in sales volume. To sustain its revenue model in the long-term, Caradog Cakes has also adopted an environmentally friendly business model, whereby deliveries are restricted to the local area to reduce the carbon footprint. Although this operational plan gives it more community support and appeal, it significantly dents its prospects of expanding its revenue base outside its traditional borders of operation.

Summary

Overall, this study shows that the business canvas model can be applied in different sectors. The three businesses highlighted in this study are evidence of this fact but they also show that the different tenets of the model have varied weights on a business, depending on its goals and objectives. Therefore, there is a need to cautiously implement the model in the practical business setting.

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